Air Canada on Tuesday reported profit of $186-million for the three months ending on June 30, compared with $410-million in the year-earlier periodAdrian Wyld/The Canadian Press
Air Canada AC-T saw an 11-per-cent decline in U.S-bound seat sales in the second quarter amid trade and sovereignty tensions spurred by U.S. President Donald Trump.
Canada’s largest airline posted a 2-per-cent rise in overall operating revenue as travellers chose domestic or overseas destinations.
“In the transborder market, we continue to see less demand for trips to the U.S.,” said Mark Galardo, Air Canada’s chief commercial officer.
Air Canada on Tuesday reported profit of $186-million for the three months ending on June 30, compared with $410-million in the year-earlier period. Adjusted for a tax settlement, profit was $207-million, or 60 cents a share, compared with $369-million (98 cents) in the same period a year ago.
Analysts had expected adjusted profit of 72 cents a share.
The Montreal-based carrier’s results were weighed down by rising operating expenses, a weak Canadian dollar and a 16-per-cent rise in labour costs.
Investors reacted to the results, released on Monday night, by sending Air Canada’s share price down by more than 12 per cent Tuesday on the Toronto Stock Exchange.
“This second quarter was not business as usual,” Mr. Galardo told analysts on an earnings conference call on Tuesday morning. “We navigated through a period of significant economic and geopolitical uncertainty and we contended with reduced demand for transborder travel.”
Other headwinds included reduced demand for travel to the Middle East and India, increased competition in China and Hong Kong, and currency fluctuations, he said.
Mr. Galardo said the drop in U.S. travel was expected and accompanied by an 8-per-cent decline in seat capacity and better per-seat yields.
Canadians have adopted an elbows-up stance against Mr. Trump’s threats to make Canada the 51st state and crush its industries with tariffs. They have shunned U.S. visits and products and lauded campaigns to spend their money at home.
According to Statistics Canada, the number of Canadians crossing the border by plane fell through the first five months of the year, and was down in April and May by 14 per cent and 24 per cent, respectively, compared to a year ago. Trips by car, which comprise three-quarters of travel to the U.S., fell by more than 35 per cent for these months.
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The diminished U.S. market is significant for Canada’s airlines because it was the destination for 75 per cent of all trips abroad by Canadians in 2024.
Air Canada responded to the reduced demand by deploying its fleet to domestic and overseas destinations, adding flights to Naples, Prague and Manila.
Sales to Transatlantic and Latin American destinations rose by 5 per cent and 11 per cent, respectively, while domestic seat sales rose by 3 per cent, from a year ago.
Mr. Galardo said Air Canada is seeing a rise in demand for off-season seats to southern Europe as travellers seek mild temperatures and smaller crowds.
Still, Judith Coates, owner of travel agency Wired For Travel in Toronto, said she has not seen a large drop-off in demand for travel on U.S. cruise ships, which comprise most of her business there.
“People have been asking, ‘What are other cruises we can take instead?’ So, Mediterranean or Caribbean islands. That would be the only thing I have seen,” Ms. Coates said while working from Anchorage, Alaska.
“What I have noticed a lot is every American that we encounter apologizes to us,” she said. “So the people in the U.S. are quite happy that they we are there and they apologize for the way they see that we are being treated.”
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Air Canada’s overall passenger revenue, which excludes cargo and other sources, rose by 1 per cent on a 2.5-per-cent increase in seat capacity. The planes, on average, were 85-per-cent full, little changed from the year-earlier period.
“We made the right early calls to match our capacity to the evolving demand landscape,” Mr. Galardo said.
Meanwhile, Air Canada’s 10,000-plus flight attendants are voting until Aug. 5 on a strike mandate as the Canadian Union of Public Employees negotiates with management for a new collective agreement.
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A strike mandate is intended to give the union more power at the bargaining table, and does not mean a work stoppage is inevitable.
Air Canada said the vote is part of the usual negotiating process.
Air Canada’s 5,400 pilots last year approved a contract that provides 42-per-cent raises over four years.